Resource Misallocation and Regional Policy in China

Authors

  • Lihua Xu School of Economics, University of the Thai Chamber of Commerce, Bangkok, Thailand

Keywords:

Total Factor Productivity, Resource Misallocation, Regional Policy, Heterogeneous Firms

Abstract

The research presents a monopolistic competition model with heterogeneous firms to measure resource misallocation across regions and sectors in China. This paper investigates the role of a reduction of the corporate income tax rate and value-added tax reform on productivity and resource misallocation. Micro-data from Chinese manufacturing enterprises in 1998-2007 are used. The results show that overall resource misallocation increased after 2000. Resource misallocation increased faster in the Northeast and Southwest regions, where preferential policies were applied. Moreover, physical and revenue productivity were promoted by the reduction of corporate income tax and value-added tax reform. The results show that the reduction of the corporate income tax intensifies resource misallocation. However, the value-added tax reform has no effect on resource misallocation

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Published

2018-01-16

How to Cite

Xu, L. (2018). Resource Misallocation and Regional Policy in China. SOUTHEAST ASIAN JOURNAL OF ECONOMICS, 49–83. Retrieved from https://so05.tci-thaijo.org/index.php/saje/article/view/109465

Issue

Southeast Asian Journal of Economics, Vol. 5 No. 2 (July - December 2017)

Section

Original Articles

License

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